Analysis
Graves Park in Sheffield was held by the defendant council on a charitable trust governed by scheme made in 2009. Clause 4(2) of the scheme provided that the land subject to the scheme ‘must be retained by the trustee for use for the object of the charity’. Clause 10 of the scheme provided that “The Commission may decide any question put to it concerning: (1) The interpretation of this scheme; (2) The propriety or validity of anything done or intended to be done under it.”
Section 6, Trusts of Land and Appointment of Trustees Act 1996 provides that:
‘(1) For the purpose of exercising their functions as trustees, the trustees of land have in relation to the land subject to the trust all the powers of an absolute owner.
.. .
(6) The powers conferred by this section shall not be exercised in contravention of, or of any order made in pursuance of, any other enactment or any rule of law or equity.
(7) The reference in subsection (6) to an order includes an order of any court or of the Charity Commission.’
A cottage within the land subject to the scheme, but not open to the public, had become uneconomic to maintain and had recently become vacant. The council sought confirmation from the Charity Commission that s6 permitted the council to sell the cottage without the need for a new scheme, notwithstanding clause 4(2) of the scheme. The Commission initially answered in the affirmative but later changed its advice to the negative after receiving representations from the claimant charity. The Council applied for a formal cy-pres scheme, and the Commission changed its position again and stated that clause 4(2) was not an express prohibition on sale.
In January 2016 the defendant sold the cottage for £152,000. The Claimant was trustee of a charity established to maintain and enhance the Park. The Claimant sought declarations that (a) the defendant had no power to sell the land without a scheme made by the Court or the Charity Commission; and (b) that the sale of the cottage was therefore in breach of trust.
The issues before the Court were:
1) Did clause 4(2) constitute an absolute prohibition on sale of the charity’s land?
2) If so, was any breach of trust avoided by the Commission’s approval?
3) If not, was the council obliged to replace any land sold?
Held
- 1) The effect of clause 10 of the scheme was that a decision of the Commission that a proposed transaction would not be in breach of trust was final on that issue, and accordingly the sale of the cottage was not in breach of trust. Section 110 Charities Act 2011 would have achieved the same result, absent express provision in the scheme.
- 2) The Charities Act 2011 and the guidance from the Charity Commission distinguish between ‘designated land’ which is settled on specific charitable trusts and is required to be used for a particular purpose, and functional property which is used by the charity to further its objects but is not required to be used in this way. Sale of land of the first type would involve an alteration of the original purposes of the charity and necessitate a cy-pres scheme, but sale of the latter would not – Oldham BC v Attorney-General [1993] Ch 210 at 219B. It was agreed that the cottage was land of the second type.
- 3) The principles applicable to the construction of charitable schemes was as set out in Marley v Rawlings [2015] WTLR 299, [2015] AC 129 at 144. Although the words of clause 4(2) would suggest an absolute prohibition against sale, the factual and legal matrix made it unlikely that the draftsman intended that land for which no use could be found in furtherance of the charitable objects must nevertheless be retained. The draftsman must also be taken to have appreciated the distinction drawn in Oldham, and the wording was not sufficiently clear to put the land into the first category in that case.
- 4) Oldham is not authority for the proposition that land of any category may not be sold by charity trustees without replacement land being provided, nor is there any general principle to that effect. The trustees’ power of sale may only be exercised where it is in the best interests of the charity and conducive to the achievement of its purposes. That is sufficient protection against the charity’s holdings of functional land being improperly diminished.
Declarations refused
JUDGMENT MARK ANDERSON QC: [1] Graves Park is held by Sheffield City Council (the Council) on a charitable trust (the Charity) governed by a scheme made by the Charity Commission on 12th March 2009 (the Scheme). The claimant is one of the trustees of the Friends of Graves Park (the Friends), a charity whose purpose …Continue reading "Dewar v Sheffield City Council & anr [2019] WTLR 495"